Statement for the Record
Before the Subcommittee on Oversight
Committee on Ways and Means
United States House of Representatives
Hearing on “The Department of Labor’s Proposed Fiduciary Rule”
September 30, 2015
Business Roundtable, an association of chief executive officers of leading U.S. companies, represents member companies with over $7.2 trillion in annual revenues and nearly 16 million employees. Business Roundtable member companies provide retirement, health and other employee benefit coverage to more than 40 million American employees, retirees and their families.
On behalf of the more than 200 CEO members of Business Roundtable, we commend the Subcommittee for holding this hearing on the Department of Labor’s proposed fiduciary rule. As advocates for smart regulation, America’s business leaders support all efforts to make the federal regulatory process more transparent and open to public engagement, which will yield higher quality data, more complete and objective cost-benefit analyses and smarter, less burdensome rules. This hearing and others like it are critical to achieving those goals.
Rules and regulations exist to protect people, but a regulation can only be effective if it is carefully designed to fit the problem it is meant to solve. The Department of Labor’s proposed changes in the interpretation of the Internal Revenue Code and the Employee Retirement Income Security Act (ERISA) fail to meet that objective. To the contrary, the complex and prescriptive proposal likely would lead to serious unintended consequences that could result in significant economic disruption and harm to the retirement security of millions of participants in retirement and other employee benefit plans.
The Labor Department’s goal is to ensure that financial professionals act in the best interests of retirement plan participants when providing investment advice to a retirement plan or its participants. We wholeheartedly agree that the plan participant’s interests must come first but that will not be accomplished if, as the Labor Department has proposed, complex and burdensome barriers are erected that will essentially deny retirement plan savers access to important information about and assistance with investment alternatives and services.
The Labor Department’s proposed definitional changes are too broad and too subjective, and its proposed exemptions are too narrow and would raise the costs of saving for retirement. For example, the proposed regulations’ new investment advice fiduciary standard would apply to activities, interactions and relationships that should not be considered “investment advice” under ERISA or the Internal Revenue Code. Important investment education that our member companies currently provide to retirement plan participants would be unnecessarily limited, and the complex new rules and byzantine proposed exemptions have the potential to sweep plan sponsors and their employees into unwarranted litigation.
Business Roundtable and many of our member companies have filed extensive comments with the Labor Department on these and many other issues. An overriding concern is that the proposed regulation would not leave sufficient room for activities that are designed to help and encourage individuals to save, invest and plan for retirement. In fact, financial education and planning assistance are among the most beneficial services that many thousands of employers and financial advisors across the United States offer to their employees and clients.
Overall, the Administration needs to go back to the drawing board on its proposal and seriously evaluate the availability of less burdensome alternatives.
Among the thousands of comments filed on the Labor Department’s proposal, almost 200 members of Congress (from both sides of the aisle) have expressed serious concerns. A September 24, 2015, letter to Labor Secretary Thomas Perez from almost 100 House Democrats emphasized that the Labor Department should “consider options for convening a small working group of industry professionals and consumer advocates to aid with the finalization of the Rule.”
We strongly agree. Broad and complex regulatory reinterpretations can cause great disruption in existing relationships and practices, particularly when they involve changes to a long-standing definition. While some change may be appropriate, a wholesale reengineering transformation of this magnitude and importance requires time and warrants an especially robust discussion among stakeholders. Critically, in the instant case, interested parties should be provided with the opportunity to evaluate and comment on the changes that the Labor Department will have to make before its fiduciary regulation can be finalized.
A letter from Subcommittee Chairman Roskam to the Labor Department concluded by emphasizing his belief that “there is a great opportunity for Congress to work with DOL and others in establishing new standards for the benefit of consumers in retirement services.”
As shown by the broad bipartisan support for substantial revision to the Labor Department’s proposal, there is a better way forward that not only offers better advice to all retirement savers, but also eliminates the unintended harmful side effects.
Thank you for your attention to this important matter. On behalf of Business Roundtable, I stand ready to work with you and the Administration on a solution that works best for our employees and all retirement savers.